[Today] Will cryptocurrencies be taxed fairly?
[Today] 2020.06.16. On Tuesday, stocks took an unexpected turn. The benchmark Kospi spiked by 107.23 points, or 5.28 percent, making up for all the losses from the previous trading day. Stocks were rallying as the U.S. Federal Reserve announced plans to purchase corporate bonds as a means to increase liquidity in the market. The Korean stock market is manic-depressive these days. Sometimes it reacts sensitively to age-old negative factors, and sometimes it doesn't even budge. As investors get carried away in the stock market’s emotional ups and downs and repeat buying at the peak and buying again at the bottom, they will find their original investment slowly melting away. The best way to avoid any mishaps and succeed is to stick to the basic principles of investing. #Economy & Crypto = Please tax only where there is income Korea Economic Daily exclusively reported recently that the government will impose tax on all capital gains from selling listed stocks and funds from 2023. Currently, the government only taxes “major shareholders,” those that have more than one percent stake in a company or own more than one-billion-won worth of stock. If this change happens, it means that all gains from stocks and funds will be taxed from 2023. The Ministry of Economy and Finance immediately refuted the report and said “nothing has been decided.” The Finance Ministry has been pushing for a revision to the financial tax system since last year. The government’s main goal is to fulfill the basic taxing principle of “where there is income there is tax.” Currently, the Korean tax system has so many loopholes. For instance, any investor that does not meet the qualifications of a major shareholder is not mandated to pay tax no matter how much they earn from financial investments. Of course, everyone has to pay a 0.25 percent transaction tax. Having new taxes to pay is definitely bad news. So, the government said it plans to adjust the tax system for financial income in a reasonable direction. Under the old rule, if an investor made 10 billion losses from one investment but was able to make 5 billion won from another one, the government would impose a tax on the five billion income, even though the aggregate total created five billion won in losses. The government will not allow the carryover of the deficit. For instance, if an investor lost 10-billion-won last year but made a 5-billion-won profit this year, the person will be taxed for the income made this year of five billion and not on the 10 billion losses. The change will only tax the “real income earned” through investment activities. Nothing can be more reasonable than this. Tax policies for cryptocurrencies will head in a similar direction. The government is considering classifying income from cryptocurrencies a “miscellaneous income” due to the ease of taxing it. However, shouldn't the government classify them the same as stocks or bonds, if it really wants to stay true to the original goal? We hope the recent discussions on tax does not foreshadow increasing taxes in the future. #Insight: 320 million of unidentifiable transaction fees still under mystery Three suspicious transactions happened in the last four days. A person paid around 320 million won in fees just to transfer 160,000-won worth of ethereum cryptocurrency. The same happened on two other days, where a person paid 320 million won to transfer 10 million won of ethereum and 60 million won of fees to transfer 90-million-won worth of the currency. It may not be a coincidence. Then what was it? Some raise the possibility of money laundering or computer hacking. But that may not be sufficient to explain what actually happened. If it was the work of a hacker, it only makes sense if the money goes into the hands of the hacker. But the person claiming the fees are miners, not the hackers. If it was money laundering, the only explanation was that the person sending the money conspired with the miners to create an abnormal transaction. In that case, we do not know for sure exactly which miner took the money. Was it really a mistake when it happened multiple times? To note, the remitter for the first and second abnormal transactions is the same person.